Canada's February Inflation Slows Unexpectedly, Ramping Up June Rate Cut Bets

• Canada's inflation rate surprisingly cooled in February to its slowest pace since June 2023, and the closely-watched core inflation measures eased to more than two-year lows, data showed on Tuesday. This prompted investors to increase their bets on a June rate cut.
• Money markets increased their bets for a first 25 basis point rate cut in June to more than 75%, from 50% before the inflation data. The bets for an April rate cut increased to over 28% from 18% before the numbers were released.
• Annual headline inflation cooled to 2.8% last month, beating analyst expectations for a 3.1% rise and below a 2.9% increase in January. During the month, the consumer price index rose by 0.3%, less than a forecast 0.6% rise.
• Canadians in February benefited from softer price growth in food purchased from stores and a drop in cellular plans and internet services prices, which were the main contributors. The rise in grocery prices eased to 2.4%, slower than the headline inflation rate for the first time since October 2021. Offsetting the inflation deceleration in February was a year-over-year increase in gasoline prices, which rose 0.8% in February after a 4% decline in January, Statscan said.
• The Bank of Canada's (BoC) preferred measures of core inflation edged down to their lowest levels in more than two years. CPI-median slowed to 3.1% from 3.3% in January, while CPI-trim decreased to 3.2% from 3.3%. In January, the central bank projected headline inflation to remain around 3% in the first half of 2024, before cooling to 2.5% by the end of the year. It will update its forecasts next month. The BoC’s next rate announcement is on April 10.

(Source: Reuters)